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By Tom Cushing

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About this blog: The Raucous Caucus shares the southpaw perspectives of this Boomer on the state of the nation, the world, and, sometimes, other stuff. I enjoy crafting it to keep current, and occasionally to rant on some issue I care about deeply...  (More)

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Business: too big to succeed?

Uploaded: Nov 2, 2011
Item: Grocery chain manager calls the cops on pregnant couple, with small child, who forgot to pay for a sandwich. Adults are hauled-off to jail; child placed in protective custody for a time.

Item: Bank offers cash back on credit card, while proposing to charge $60/year for the privilege of using your own money to shop with their debit card (rescinded yesterday, I'm told).

Same bank has interminable lines in its branches, but has a cheerful ingenue cruising the assembled multitude to ask if we'd like to open new accounts. She does not do 'teller.'

Item: movie rental company proposes to raise its streaming price by 60 (count-em) per cent, and brags that they could've raised it further.

Item: global telecom company pays its bills on a 45-day lag time (but woe unto customers who delay a day over 30 in paying their bills!)

Item: Wall Street routinely punishes warehouse grocery for failing to join competitors' race to the bottom – instead, they treat their employees to certain minimum decencies -- like benefits.

What's going on here? Are these isolated incidents in a multi-trillion dollar economy, or evidence of a more general malaise infecting contemporary commerce? I submit that they represent just a few of the worst examples of one fundamental flaw: short-term thinking driven by an obsession with short-term profit performance. Business is forever claiming to reinvent itself; in my view it needs to reinvent and recall its reasons for being – to serve people. How do these examples fit the big picture? Let me recount the ways.

I am guessing (admittedly) that the grocery store has either hired least common denominators, judgment-wise, or inadequately trained them, or both -- since judgment and training both cost money. Upper management may congratulate itself on the overhead expanse burdens they've attacked -- but they also have to wear appalling incidents like the one first above. I know at least one consumer who has vowed to "vote with her feet" and shop elsewhere, at least until that new lucky merchant commits a similar gaffe.

The service sins of the banksters are many and well-documented. Their arrogance and unique variation on the "entitlement mentality" (here, to profit) is reflected in misdeeds from mortgages through debit card fees to staffing. Not to go all Wonderful Life on you, dear reader, but they seem to have forgotten that being a bank-of-opportunity means having the privilege of serving people's needs, not the opportunity for a bigger manse in The Hamptons.

If you asked the movie CD CEO why he disparaged his customers, I'll bet he could refer you to focus groups and pricing points and matrices in multiple dimensions that all support his actions. But by raising his prices so quickly, he exalted this quarter's performance over the mutually-profitable, longer term good will value of his relationships with his customers. I daresay they were not first in his mind, and he has squandered his service company's first-mover head start as a direct consequence.

Finally, that telecom invoice delay is yet another example of what happens when finance is master, rather than servant, of the underlying commerce it facilitates. The delay is simple bullying -- it adds no value; it simply extracts it from small businesses who supply the giant -- because the giant can exact that tribute. Somebody, maybe a bright, young MBA from a good school, earned a bonus by recognizing that the conglomerate could reap an annual reward in the millions by extracting a bit of the time-value of money from each supplier.

The legendary statistician/guru W. Edwards Deming taught that the One key guide-star of business should be quality – and that everything else follows therefrom. He was right, and still is right. When businesses delude themselves into believing that that precept does not apply to their goods and services -- or to their decisions and their treatment of customers -- then they have become too big to succeed.

Comments

Posted by Hal, CDSI Research, a resident of another community,
on Nov 2, 2011 at 10:36 am

Dear Editor and Tom,

Simply excellent. Let me add one more.

It appears BART has taken the same marketing approach to switch discount card holders to Clipper Cards. They have cancelled card sales at retailers and put their own "Mytransitplus" locations out of stock on senior green cards. Now, try to understand how a senior buys a discount clipper card at www.bart.gov.

The reality of business is "the business of business is the moment of sale and all the rest is delivery and accounting" and therefore any business must success by answering "who asked you to do it and how and when do they want to buy?" Netflix forgot this reality and lost 800,000 customers. BofA will not provide the numbers of customers that switched to free banking at various credit unions.

Now more late than never they remembered "The business of business is the moment of sale." Customers are quite costly to gain and more expensive to retain when accountants think they are sales people.

Nice work!!

Hal


Posted by member, a resident of Danville,
on Nov 2, 2011 at 7:14 pm

Do arm chair quarterbacks every make anything other than comments?


Posted by spcwt, a resident of Danville,
on Nov 3, 2011 at 9:52 am

You lament corporate greed, ignoring that businesses are merely responding to consumer greed.

Greedy consumers demand low prices. When shopping, consumers generally don't care if their purchases are made by slave labor, or from wood illegally clear-cut from rainforests, or from factories that poison groundwater, or from internet businesses who don't collect sales taxes. I would love to know how many of these Occupy Wall Street protesters are aware of how their greed is contributing to their plight. They're so used to blaming others, it's doubtful they'd accept any responsibility.

And it's greedy consumers, not the "Wall Street" boogieman, who are "punishing" the warehouse grocery for choosing profits over employee benefits. People who buy stocks (Joe & Jane Consumer) demand profits or they'll sell your stock. And if a company doesn't produce profits, it will either go bankrupt or be bought and dismantled by a stronger company that values profits. Every company has to fight to stay alive every single day.

You lament the "race to the bottom" as if in the mythical glory days of the 1950's & 60s' we didn't poison our air and water, treat workers like dirt, discriminate, and nickel & dime everyone. Sure, back then, many businesses offered health insurance because it was cheap. Not anymore. And they offered pensions knowing most wouldn't live long enough to collect. We were just as greedy back then as we are now. All of us, both businesses and consumers alike, have always "raced to the bottom line." You think that's something new?


Posted by karen, a resident of Danville,
on Nov 4, 2011 at 1:12 pm

spocwt: Consumers are not greedy. They are broke. If they are super weatlthy they shop at Neiman Marcus or the luxury stores where the greedy shop. Consumers on a budget now in case you are out of touch with the reality of most people, even in Danville which has plenty of people out of work and suffering though not at the level of some places but here are foreclosures here also. This is a town where many kids feel entitled to free rent as adults even if parents are struggling because their rich friends are spoiled by parents (princes and princesses) and where the high school kids throw out their unopened lunches and the schools dump furniture and other objects that are desperately needed in the "other world' communities of Richmond et al. Costco is doing well because they provide great benefits and treat their employees well but they also provide many items that households and businesses can use.

Of course businesses need to earn a profit but they should offer some understanding. One thing that no one mentions is the self-employed even if their incomes have increased (adjusted gross) and they have been paying their high interest rate mortgages on time, they are unable to refinance. Every day I speak to those in small business either with one or two employees that are not able to invest in hiring due to high mortgage rates. The banks tell us they prefer people on salaries as less risky however anyone can lose their job at any minute. It makes no sense. Having to be underwater to qualify or fannie and freddie is very frustrating to owners of small businesses. We need a program to address this so that small businesses can grow and afford to hire people. Paying 60k annually in mortgage that could be reduced to 35K would certainly allow the hiring of an employee and help the economy by being able to grow the business.


Posted by spcwt, a resident of Danville,
on Nov 4, 2011 at 3:59 pm

Karen,

If you're broke, you don't belong in Danville. Move. There are plenty of great communities nearby that are much cheaper. When I was poor, I lived in Concord. Great town. Great people, schools, businesses, cheaper housing.

You say, "We need a program" to address the difficulties people face when refinancing. I'm sorry, but you can't expect the taxpayers to fund a Danville lifestyle. Stop expecting handouts. Don't live in Danville if you can't afford it.

People are broke because they mismanage their money. Period. I used to live on $2,000 per month and was quite happy. I even saved money.

Stop subscribing to the consumerist lifestyle. Consumer greed is destroying the planet. Don't buy iPhones. Don't shop at Costco. Quit your Starbucks habit. Make do.

I still wear clothes that I bought in 1989. My car is older than my teenage daughter. I haven't paid for a haircut in 20 years. My wife cuts it for free.

I am the millionaire next door. I am the 1%.


Posted by jrm, a resident of Vista Grande Elementary School,
on Nov 4, 2011 at 4:57 pm

Spickwit the sanctimonious-
[Post removed due to disrespectful comment or offensive language]
do you know the leading cause of bankruptcy is healthcare related expenses, not profligate spending in a number of states? Wake up Dude, oh sorry, wake up old man...BTW, hope you like the new tennis courts I helped pay for at SRV..keep healthy, cuz if you get a bad cat scan you are in deep guacamole...


Posted by spcwt, a resident of Danville,
on Nov 4, 2011 at 6:20 pm

jrm,

My old nemisis. Nice to hear from you! I thought you'd given up on these pages long ago. I'll admit my last comment was over the top, but I'm getting quite grumpy in my old age listening to all these young over-educated kids complaining all the time. If they want a better job, they should start by covering up the tattoos and lose the piercings.

In all seriousness, I agree that medical costs are out of control and it is sad to see so many people financially devastated by health-related tragedy. Too bad that healthcare reform didn't solve the problem. All that's going to do is further bankrupt our country.

But you've got to admit, too many people spend like crazy and expect the rest of us to pick up the tab. I have a brother-in-law on welfare, food stamps, subsidized housing, and yet he somehow finds the money to buy all the latest Apple gadgets.
I thought about buying an iPhone but it's $90 bucks a month! That's over $1,000 per year! If these idiots would instead invest that $1,000 in a conservative mutual fund earning 6%, they would have $83,0000 at retirement!!

I'm glad we're in a recession. Maybe people will learn a thing or two about saving money.

"Spickwit" ha ha. That's funny.


Posted by American, a resident of Danville,
on Nov 5, 2011 at 9:53 am

Spcwt reference to the "Millionaire Next Door" is a very valid point. It is a fantastic book that should be required reading in the high school, instead of the liberal, "My two dads" type books pushed on our kids. It talks about making wise, economic decisions, and saving for a rainy day. Shopping at Sears, bringing my lunch to work, driving an old American car, are things in the book that I actually do. JRM is correct that medical emergencies hit everyone and are devastating, financially and emotionally, and personally I know all about that. But beinig prudent, having a solid but not fancy health plan, like Kaiser that I have, helps protect me and my family. Not buying a starbucks every day adds up and allows me to pay my Kaiser premium.


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